Walmart's investment in Flipkart might run into trouble

In July this year Flipkart-owned Myntra acquired fashion e-tailer Jabong from the troubled Rocket Internet. It is interesting that Jabong was allegedly facing corporate governance issues when it was acquired.Pranbihanga Borpuzari | ET Online | Updated: October 26, 2016, 14:33 IST

Investment by the world's biggest retailer Walmart Stores Inc in Flipkart seems to have run into trouble with sources stating the deal is facing hiccups. Walmart was in talks with Flipkart to invest between $750 million and $1 billion for a minority stake.

Late last month, reports surfaced about Walmart looking to pick up an equity stake in Flipkart. Both Flipkart and Walmart have a common competitor in the form of Amazon and a strategic deal made sense. According to sources, financial number issues have cropped up putting a spanner in the works of the deal.

On Tuesday Flipkart's Chief Financial Officer Sanjay Baweja abruptly quit the company, less than two years of joining India's largest e-commerce marketplace. Flipkart had a successful sale season this year and it is widely believed to have done better than Amazon in sales. However, Flipkart has been looking for funding for some time now and the latest setback can prove to be difficult for the company. Sources add the doors are not entirely shut, but at the moment the deal looks difficult. We have reached out to Flipkart and Walmart for a comment and will update the story when we receive a reply.

Flipkart is going through a revamp after it saw a slew of top management exits this year. Current CEO Binny Bansal and the head of category management, Kalyan Krishnamurthy, are locked in a battle for supremacy with Amazon. The recent Big Billion Days sale was successful for the company and it says it has seen a 30% improvement in revenue on business as usual days.

In July this year Flipkart-owned Myntra acquired fashion e-tailer Jabong from the troubled Rocket Internet. Jabong was allegedly facing corporate governance issues when it was acquired.

Walmart, on the other hand, is keen on expanding in the ecommerce sector and not alien to investments. The company has invested in China's second largest marketplace, JD.com and in August acquired the US-based Jet.com for about $3.3 billion. Walmart had earlier tried to establish a footprint in India, but a bribery scandal in Mexico and other differences let to a breakup of a joint venture with Bharti Enterprises.

Publicly available data shows Flipkart has raised about $3.2 billion in funding over 12 rounds from 16 investors. Executive Chairman and Co-Founder of Flipkart, Sachin Bansal had earlier said the company has not thought of listing on the bourses. In contrast, Jeff Bezos has poured $3 billion in Amazon India, taking the overall investment pledge to $5 billion in the last two years.